Article

Does a Rose by Any Other Name Smell as Sweet? From US Class Actions to US Multidistrict Litigation

June 2013

Tripp Haston and Fritz Spainhour of Bradley Arant Boult Cummings chart the history of the decline of class actions and the rise of multidistrict litigation over the past 15 years.

"Although MDLs and class actions can both lead to broad settlements, their procedures differ in a number of ways and can have different advantages or challenges."

In July 1996, plaintiffs filed a lawsuit against Ford Motor Company in Tennessee state court. Along with the complaint, the plaintiffs’ lawyers filed a sweeping motion, accompanied by a stack of exhibits requesting that the case be certified as a class action. By the end of the day, the judge had entered a nine-page order creating a nationwide class of 23 million members – one of the largest class actions in history. Ford had not even been served with the complaint.

That same year, the purported beneficiaries of an Alabama state-court class action were trying to undo the settlement their lawyers had negotiated. And with good reason. While their lawyers took home millions of dollars in fees, some class members actually had to pay money as part of the settlement. As the court in the ensuing federal case described one plaintiff’s predicament, “A class action in Alabama cost Dexter Kamilewicz $91.33 in attorney fees to recover $2.19 on the merits.”

These are just two of the more notorious stories from US class action litigation. Unfortunately, they are far from unique. In fact, these vignettes are simply emblematic of two problems that were systemic in US class action litigation during the 1980s and 1990s. First, corporate defendants often found themselves at the mercy of state-court judges with local constituents to please, resulting in quick certifications of class actions that led to expensive settlements. Second, unlike their class counsel – and despite the huge sums defendants were paying out – class members often received little to no benefit from these mega-settlements.

In part as a response to these two problems, there has been a serious effort to reform this system. As a result, over the last 15 years the US class action has steadily declined as a vehicle for civil claims, especially in personal-injury, product-liability cases. Fewer class actions are being filed, and stories of abuse are reported less frequently. But in their place, another vehicle for mass litigation has become more prominent – the multidistrict litigation (MDL). While class actions have shrunk in number and influence, MDLs have been on the rise, particularly in the product-liability context. And for product manufacturers, they present many of the same challenges presented by class actions.

US CLASS ACTIONS IN DECLINE

In the 1990s, class action regulation began to tighten. One of the major changes came in 1998, with the amendment of Federal Rule of Civil Procedure 23, which governs class actions, to allow for interlocutory appeals of class certification decisions. Before this amendment, a defendant who wanted to challenge class certification first had to proceed to judgment before taking an appeal. But given the uncertainties of class actions – and their inherent risks – the certification of a large class almost always led to settlement: defendants could not run the risk (however small) of a bankrupting verdict against them. As a result, few class actions made it to appellate courts. With the 1998 amendment, a more robust body of federal law on class actions became possible.

In 2003, Rule 23 was amended again to encourage closer judicial scrutiny of the class action process. In place of the former requirement that a court should decide class certification “as soon as practicable” the amended rule establishes that certification should be decided “at an early practicable time”. That change, in practice, has allowed parties to take more discovery on the question of certification and, to some extent, on the merits of the claims. The revised rule also omits an earlier provision that allowed class certification to be conditional, and the Committee Notes now instruct courts to “refuse certification until [the requirements of Rule 23] have been met”. These revisions increased the burden for obtaining class certification.

Not all of the changes to the class action process have come through amending the Federal Rules of Civil Procedure. Since the 1990s, US federal courts have issued several decisions that further restrict class action abuses. But federal courts have long been a more favourable forum for corporate defendants, and they are just one side of the equation for reform. State courts are often more plaintiff-friendly, and the federal reforms only increased plaintiffs’ lawyers’ desire to litigate class actions in state court. In 2005, the US Congress acted to stunt the growth of state-court class actions by passing the Class Action Fairness Act of 2005 (CAFA). Citing, among many other examples, the two stories of class action abuse discussed above, CAFA made it much easier for defendants in putative state-court class actions to remove their cases to federal court for adjudication. And the federal courts have given CAFA real bite, as evidenced by two US Supreme Court decisions issued earlier this year in Comcast Corp v Behrend and Standard Fire Insurance Co v Knowles that further restricted class actions.

These reforms have been effective in preventing some of the class action abuses of the past. Moreover, although state-court data is difficult to track, it appear that fewer class actions are being filed in state court, and empirical studies have concluded that class certifications are on the decline in some states’ courts. Finally, Madison County, Illinois, which was a well-known and challenging state court for corporate defendants, has seen a marked decrease in class-action filings over the past several years.

MDLS ON THE RISE

But with the decline of class actions, MDLs have been on the rise:

“In an age of increasing skepticism regarding the use of class actions in our legal regime, the modern multidistrict litigation (MDL) process embodied in 28 U.S.C. § 1407 is emerging as the primary vehicle for the resolution of complex civil cases.”

According to Deborah Hensler of Stanford University, a leading authority on mass tort litigation:

“After almost two decades of multilateral attacks, private class actions are on the decline in the United States. Mass tort class actions have virtually disappeared... replaced by aggregated lawsuits resolved in multidistrict litigation.”

Indeed, the number of MDLs docketed each year has doubled between 2002 (roughly 50) and 2012 (roughly 100). Many of the same firms who pursued class actions in the 1980s and 1990s have now turned to MDLs as their civil litigation vehicle of choice. As of 15 May 2013, there were 290 MDL dockets pending in 56 separate federal district courts, involving more than 320,000 pending and disposed-of actions.

Although MDLs and class actions can both lead to broad settlements, their procedures differ in a number of ways and can have different advantages or challenges. To create an MDL, a party in an existing federal case must go before the judicial panel on multidistrict litigation (JPML) to request consolidation with other filed cases. Thus, unlike class actions, MDLs are opt-in: every claimant must file a lawsuit. In this respect, MDLs create more work for plaintiffs’ attorneys, who must identify individual clients and pay individual filing fees for each and every claimant.

Another difference between MDLs and class actions is that MDLs often have cases that go to trial. But whereas class action trials, infrequent as they may be, are all-or-nothing affairs on behalf of the entire class, MDL trials are often “bellwethers” – that is, test cases of individual plaintiffs’ claims, without the binding effect on the remaining cases.

Studies on MDLs show an increase in their prevalence that coincides with the decline of product-liability class actions. The JPML was created in 1968, but before 1990 it had set only six product-liability MDLs. Then, from 1990 to 2008, the JPML established 112 products-liability MDLs (and heard requests for at least 42 more that it chose not to create). Excluding asbestos cases, the 1990s had one major MDL, Silicone Gel Breast Implants, which comprised over 10,000 constituent cases at its peak. Since 2000, the number and diversity of major product-liability MDLs has grown significantly and touched all facets of the product-manufacturing industry, including prescription drugs, medical devices, automobiles, aircraft, industrial chemicals and construction materials. Of the 286 currently pending MDLs, approximately 80 of them are product-related.

MDLs present their own unique challenges for corporate defendants. First, the sheer cost of document production and other discovery can be overwhelming. Culturally, for defendants based outside of the US, the expansive reach of MDL discovery can be a disruptive challenge and far different from the more narrowly tailored discovery to which they are often accustomed. Individual causation and damages for particular actions can often get lost in the mix of corporate-focused discovery and bellwether cases that, although intended to be representative of the pending cases, instead often turn out to be outliers that can effect a quicker – but more expensive – resolution.

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Given the increased international focus on the development of effective collective redress procedures – and the desire by policy makers to avoid some of the historic abuses of the US class action procedure – it is important to understand the series of reforms that have occurred over the past 15 years so that others can avoid those abuses. Equally important, policy makers must understand and appreciate the rise of the MDL procedure in the US as a vehicle for resolving mass tort litigation.

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